Pre-Flush Hoarding Extends the Winter

Yesterday delivered yet another eventful trading day. With over 600mt of butter changing hands, fats once again stole the spotlight. That in itself isn’t surprising, considering yesterday marked the second GDT event of the year, always keeping activity on powders to a minimum. The tender closed slightly in the plus, with most commodities posting modest gains. Powders once again outperformed expectations, fats landed at the upper end of our forecast range, and cheese… disappointed. Meanwhile, the EU spot market is losing momentum fast. Although cream is still trading above €3,000, the expectation of losing the three is increasingly shared among even our more cautious counterparts.

GDT: Another Bullish Signal

Let’s start with the bullish feedback. The GDT came in +1.5%, building further on what was already a strong result two weeks ago. We might have expected a small correction this time around, but once again most commodities printed better than anticipated. Zooming in, it’s primarily New Zealand material driving the gains versus the previous tender. The EU powder market also showed small but meaningful increases. With March/April SMP averaging around €2,150, the market is anything but weak.

EU Commodities: Not All Sharing the Optimism

That said, not all EU commodities followed the same path. Solarec butter traded almost exactly where we expected it to, averaging €3,900 for Feb/March/April. No surprises there. Mozzarella, however, underperformed. Forward prices slipped below €2,900, clearly below our expectations and confirming the softer tone we’ve been hearing from the market.

Liquids and Butter: Downward Pressure Remains

The EU liquids market continues to amaze us — and not in a good way. We keep seeing raw milk well below contract, SMC well under €1,000, and cream prices trending lower week after week. One partner told us last week:

“If the cream market can’t find an upward trend by week four, the market is doomed for many more weeks.”

Well… here we are. Let’s call it what it is: doomed for many more weeks. At the risk of sounding like a broken record, more milk is coming, seasonally milk intake is going to grow for another few weeks WoW. Over the next 10–20 weeks, additional volumes are likely to keep spot prices under pressure. Commodity production is running high, while demand remains sluggish.

Especially on the cream side, the same factors keep resurfacing:

• Demand for 250g packs remains weak, forcing producers to slow production or switch to 25kg blocks
• 25kg capacity is full, pushing more cream eastward
• Fresh cream demand is unlikely to pick up before week 12, leaving at least six more weeks of downside risk
• Warehouse and freezer capacity is becoming a real constraint

Butter: Storing Instead of Selling

Speaking with butter producers across the region, the message is remarkably consistent: better to store than to sell low. Understandable? Maybe... we understand that selling with a loss is hard, pushing the problem ahead feels safe  — but also problematic.

It feels like the market is stocking up for Christmas… right after Christmas. Preparing for winter while spring, summer, and autumn are still ahead. While preparation is often praised, in this case the market isn’t solving a problem — it’s stretching it out.

One partner summed it up perfectly:

“Pre-Flush Hoarding Extends the Winter.”

The contrast between butter and powder explains our view best. Cheap SMP produced from SMC finds an outlet on the export market with ease. The EU is currently the cheapest SMP origin, meaning additional production is absorbed fairly smoothly. Butter is a different story. At roughly €1,000 too expensive to generate real export liquidity; every extra block going into storage only extends the butter winter. Cheap butter added today becomes tomorrow’s overhang.

A Thought Experiment

We’d almost suggest the top 10 EU butter producers meet in Dubai next week and simply run the numbers together. Add up how much product they’re collectively freezing — then add the volumes sitting with traders. That combined figure likely explains the persistent downward pressure better than any chart ever could.

High Quotations, High Frustration

To be clear: we don’t want lower prices. Quite the opposite. We’re dairy enthusiasts and would love to see the European market thrive. But the belief among some EU producers that commodity prices can be controlled is proving costly Our biggest market concer contineu to be the artificially high quotations from France and Germany, which haven’t supported the market — they’ve merely broken the risk management tools the market desperately needs. If farmers, end users and traders can no longer rely on futures to help with their market exposure, index buying will reduce, adding more volatility to the spot market. This is fine for us as a physical butter broker, but bad for long-term sustainable business.

This week’s French and German quotations will likely once again come in well above traded market levels. Where we see trades between €3,700–€3,900, quotations are still expected north of €4,000.

After the unpredictable behaviour of the US president this week, we have heard so many partners in the dairy scene say the US needs to act as a reliable, predictable partner. Those same partners should find some wisdom in that desire.

But commodity markets — especially one as liquid as EU butter — always revert to the balance of supply and demand. With supply still heavy, we brokered nearby butter between €3,710–€3,735, while Polish material was reported between €3,550–€3,600. For Q2, we traded at €3,835, while Q4 traded down to €4,300.

Cheese and Powder

On cheese and powder, there is little new to report. Cheese prices for Feb/March are easing gradually, in line with GDT signals, but the bid–ask spread remains wide, limiting trade flow. Powders continue to feel well supported, and we expect pricing to broadly track GDT developments in the weeks ahead. We have an active market negotiaton on our GFD Marketplace where 300mt of French SMP in BigBags is offered at € 2050 and bidded at € 1975 for February collection. Anyone interested? go the GFD Marketplace and sign in at https://marketplace.getfairdairy.nl/

Final Note

Markets don’t break because prices are low — they break when signals stop working.

Butter isn’t short. It’s just waiting.